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Car Wash Owners Will Pay $3.9 Million For Unpaid Wages, Underreporting Of Employees On State Unemployment And Workers’ Compensation Forms

Schneiderman: My Office Will Stand Up For Hardworking New Yorkers

NEW YORK – Attorney General Eric T. Schneiderman, joined by New York City Council Speaker Melissa Mark Viverito and labor rights advocates, today announced settlements totaling $3.9 million with two interrelated car wash chains owned and operated by John Lage, Michael Lage and Fernando Magalhaes, which together operate approximately 21 car washes in New York City. The settlements are the result of the Attorney General’s investigation into widespread labor law violations, including underpayments, underreporting of employees on state unemployment insurance returns and failure to carry required workers’ compensation insurance for all employees.

Attorney General Schneiderman’s agreements require the car washes and their owners to pay restitution totaling more than $2.2 million to an estimated 1,000 car wash workers for nearly six years of underpaid wages, as well as more than $513,000 to the New York State Department of Labor’s Unemployment Insurance Division and nearly $1.2 million to the New York State Workers’ Compensation Board. In addition, the agreements require the car wash owners to pay for independent monitoring of their labor practices for up to three years, with unannounced on-site inspections and payroll audits, and with results reported to the Attorney General.

“When workers like these stand up for their rights, they need to know that state and city leaders will stand behind them. Today, we are doing just that, sending a strong message to all hardworking New Yorkers that we've got your back,” Attorney General Schneiderman said. “These agreements will ensure that the car washes clean up their acts to comply with the law. And they ensure that New York businesses who play by the rules can do so on a level playing field.”

New York City Council Speaker Melissa Mark-Viveritosaid, “Today’s settlement is sending a clear message: labor violations will not be tolerated in this city, period. After years of fighting against systemic abuse, the workers at Lage Carwash will finally have justice. Unfortunately, there are many workers in this city who may still believe they simply have to put up with abusive and unfair practices by their employer. There are those who fear that no one will come to their aid if they speak up, and that they may even face retaliatory action against them if they voice their complaints. Today, we are here to tell them that New Yorkers have every right to demand that their employers follow all labor laws, and we will be here to stand by their side if need be.”

Public Advocate Letitia Jamessaid, “It's hard enough to make it in New York. To do so while your hard-earned wages are being stolen is unimaginable. I commend Attorney General Schneiderman for helping nearly 1,000 car wash workers get restitution. All of us must continue to fight for economic justice for low-wage workers and all New Yorkers.”

From approximately November 29, 2006, through September 30, 2012, some of the car washes failed to pay all of their workers overtime and deducted pay for breaks that workers did not get. In some locations, managers improperly took shares of workers’ tips for themselves. The car washes also failed to pay “call-in pay,” required by law when workers must report to work but are sent home soon after. In addition, the car washes paid unemployment insurance contributions and secured workers’ compensation coverage for only a fraction of their total workforce, which is currently about 600 employees.

Stuart Appelbaum, President of the Retail, Wholesale and Department Store Union, said, “When we began organizing car wash workers in the city, we were amazed at the terrible conditions and culture of lawlessness that permeated the industry. Today’s announcement is an important moment in helping to change that. This settlement is a powerful statement of principle that working people can expect the full protection of the law here in New York State. Car wash owners who would deprive their workers of the wages they are owed are put on notice – they will be held accountable for their actions, and there is a steep price to be paid for those who would break the law. We are fortunate that here in New York we have an outstanding Attorney General who is willing to stand up and fight for our state’s most vulnerable.”

Deborah Axt, Co-Executive Director, Make the Road NY,said, “When we launched the WASH NY campaign to clean up the car wash industry’s dirty practices, Attorney General Eric Schneiderman was the first to say I will take a stand with you. This settlement is ground-breaking. The Attorney General’s oversight will ensure that this is the last time we need to investigate wage theft in the John Lage car washes. We thank the Attorney General, Labor Bureau Chief Terri Gerstein and her top-notch staff, and congratulate the courageous carwasheros who dared to speak out against abuse.”

Jonathan Westin, executive director of New York Communities for Change,said, “This settlement will go a long way toward giving these carwasheros some of the money they rightfully earned and should have received a long time ago. It is neither right nor legal to steal wages and withhold money from workers who have earned it.”

Miguel Portillo, an employee of Jomar Car Wash in Queens, said, “We have fought against the abuse and exploitation that many immigrants face in the car wash industry. We want to thank the Attorney General, the union, NYCC and Make the Road, but most importantly all the carwasheros for standing up and speaking out and making this victory possible. We have won money that this company had stolen from our wages, which sends a strong message to all car wash owners that the days of abuse and exploitation are over. Today justice was served. Si se puede!"

During most of the time period covered by the investigation, the applicable minimum wage was $7.25 per hour. New York's minimum wage is currently $8 per hour, and it will increase to $8.75 per hour on December 31, 2014, and to $9 per hour on December 31, 2015. Overtime laws require employers to pay covered employees one and one half times an employee's regular rate for hours worked beyond 40 hours in a given week.

In addition, the state unemployment insurance system requires employers to report all wages paid to workers and to make contributions to support the state unemployment insurance fund and cover benefits for eligible unemployed workers. Finally, virtually all employers are required to secure workers’ compensation insurance coverage so that injured workers can obtain timely medical benefits and wage replacement.

Of the total settlement amounts, the workers will receive a total of $2,223,124 in restitution for underpayments; the New York State Department of Labor’s Unemployment Insurance Division will receive $513,733 for unpaid contributions, interest and penalties, and $1,163,143 will go to the New York State Workers’ Compensation Board.

Along with the restitution and monitoring described above, the Attorney General's agreements provide additional protection for workers in case of sale or closure of a car wash location. Specifically, if any location closes or is sold, the employers must either ensure workers’ continued employment, with the new owner or at another Lage or Magalhaes car wash location, or must provide 60 days’ advance notice and priority for any new openings at another Lage or Magalhaes car wash location.

The Attorney General thanks the New York State Department of Labor and the New York State Workers’ Compensation Board for their contributions in calculating penalties, interest, and unpaid unemployment insurance contributions, and for their assistance throughout the investigation.

The case was handled by Assistant Attorneys General Benjamin Holt and Haeya Yim, and Labor Bureau Section Chief Andrew Elmore. The Labor Bureau is headed by Terri Gerstein. Executive Deputy Attorney General for Social Justice is Alvin Bragg.